$ AAPL

$ ABBV

$ ABNB

$ ACGL

$ ADI

$ ADM

$ ADP

$ ADSK

$ AEE

$ AEP

$ AES

$ AFL

$ AIG

$ AIZ

$ AJG

$ AKAM

$ ALB

$ ALGN

$ ALL

$ AMAT

$ AMCR

$ AMD

$ AME

$ AMGN

$ AMP

$ AMT

$ AMZN

$ ANET

$ AOS

$ APA

$ APD

$ APO

$ APTV

$ ARE

$ ATO

$ AVB

$ AWK

$ AXON

$ BA

$ BALL

$ BAX

$ BBY

$ BDX

$ BEN

$ BG

$ BIIB

$ BKNG

$ BLDR

$ BMY

$ BR

$ BRO

$ BXP

$ CAG

$ CAH

$ CARR

$ CAT

$ CBOE

$ CBRE

$ CCL

$ CDNS

$ CDW

$ CEG

$ CF

$ CHD

$ CHRW

$ CI

$ CINF

$ CL

$ CLX

$ CMCSA

$ CMG

$ CMI

$ CMS

$ COIN

$ COO

$ COP

$ COR

$ CPAY

$ CPT

$ CRL

$ CRWD

$ CSCO

$ CTRA

$ CTSH

$ CTVA

$ CVS

$ CVX

$ CZR

$ DAL

$ DASH

$ DAY

$ DD

$ DDOG

$ DE

$ DELL

$ DG

$ DGX

$ DIS

$ DOC

Qualcomm beat Q3 FY2025 expectations with strong margin expansion and accelerating growth in Automotive and IoT, highlighting successful diversification and potential for a positive re-rating if market sentiment improves.

# Qualcomm Delivers Strong Q3 FY2025 Beat with Expanding Margins and Accelerating Diversification

---

## Executive Summary

- **Qualcomm (QCOM) delivered a robust Q3 FY2025, beating consensus on both revenue and EPS.** Revenue reached **$10.4B** (up 10% YoY), with GAAP EPS at **$2.43** (up 29% YoY) and Non-GAAP EPS at **$2.77** (up 19% YoY), both exceeding guidance midpoints and Street expectations.
- **Earnings quality was high, with notable margin expansion.** QCT EBT margins rose 3 percentage points to 30%, and QTL margins improved to 71%. Net margin stood at **25.61%**, well above industry averages, reflecting tight cost controls and a favorable revenue mix.
- **Management struck a bullish tone,** highlighting successful diversification into Automotive and IoT, and provided strong Q4 guidance (revenue: $10.3B–$11.1B; GAAP EPS: $2.23–$2.43), underpinned by premium handset launches and momentum in non-handset segments.
- **Risks remain,** including regulatory headwinds (notably U.S. export restrictions), competitive threats from Apple, Nvidia, and Arm, and ongoing geopolitical uncertainties. However, **opportunities in Automotive, IoT, and on-device AI** are accelerating, with non-handset revenues targeted to reach $22B by 2029.
- **Catalyst watch:** Investors should monitor upcoming premium Android launches, regulatory developments, and progress in Automotive/IoT. The market may be underestimating Qualcomm’s margin strength and diversification, setting up for a potential re-rating if sentiment shifts.

---

## Performance Snapshot

| Metric         | Reported | Consensus | Surprise | YoY Change |
|----------------|----------|-----------|----------|------------|
| Revenue        | $10.4B   | $10.1B    | +$0.3B   | +10%       |
| GAAP EPS       | $2.43    | $2.28     | +$0.15   | +29%       |
| Non-GAAP EPS   | $2.77    | $2.62     | +$0.15   | +19%       |
| Automotive Rev | $984M    | $950M     | +$34M    | +21%       |
| IoT Rev        | $1.68B   | $1.55B    | +$130M   | +24%       |
| QCT EBT Margin | 30%      | 27%       | +3ppt    | +3ppt      |
| QTL Margin     | 71%      | 70%       | +1ppt    | +1ppt      |

---

## Earnings Quality

Qualcomm’s Q3 FY2025 results showcased **high-quality earnings**. The revenue mix continues to shift favorably, with **Automotive and IoT segments growing 21% and 24% YoY, respectively**, offsetting the impact of Apple modem share loss. **Gross and net margins expanded** on the back of premium Android handset volumes and operational discipline. R&D spending dipped slightly, while SG&A rose modestly, but overall **OpEx growth was minimal**, reflecting effective cost management. The divergence between strong sales growth and even stronger profitability highlights Qualcomm’s ability to scale efficiently and extract leverage from its diversified portfolio.

---

## Management Commentary & Guidance

Management’s tone on the call was **confident and forward-looking**. Leadership emphasized the success of its diversification strategy, particularly in Automotive and IoT, and reiterated a commitment to next-generation AI and data center opportunities. **Q4 FY2025 guidance** was robust, with revenue expected between **$10.3B–$11.1B** and GAAP EPS of **$2.23–$2.43**, reflecting both seasonality and continued momentum in non-handset segments. The guidance assumes ongoing premium handset launches and sustained cost discipline.

---

## Key Risks

- **Regulatory:** U.S. export restrictions on AI chips and potential supply chain disruptions in Asia.
- **Competitive:** Apple’s in-house modem development, and intensifying competition from Nvidia, AMD, and Arm in AI and data centers.
- **Geopolitical:** Ongoing tensions that could impact global demand or supply chains.
- **Demand-side:** Any slowdown in premium handset or automotive demand could pressure top-line growth.

---

## Expected Market Reaction

While Qualcomm’s operational performance and margin expansion are likely to be viewed positively, **short-term market sentiment remains mixed**. The stock has lagged broader semiconductor and tech indices, with analysts maintaining a cautious stance despite the company’s robust fundamentals. A positive re-rating is possible if the market begins to recognize the strength of Qualcomm’s diversification and margin profile.

---

## Final Takeaway

**Q3 FY2025 was a strong quarter for Qualcomm,** marked by beats on all key metrics, expanding margins, and accelerating growth in Automotive and IoT. The market appears to be underpricing Qualcomm’s improving profitability and the success of its diversification strategy, while overemphasizing Apple-related headwinds. **Upcoming catalysts** include new premium Android launches, regulatory updates, and further progress in Automotive/IoT. If sentiment shifts, Qualcomm could see a meaningful re-rating as its fundamental strengths come into sharper focus.

Qualcomm Q3 Beat: Margins & Diversification Drive Upside

QUALCOMM is set for Q3 FY2025 outperformance, driven by strong QCT growth, operational efficiency, and aggressive share repurchases, with EPS likely to exceed consensus despite macro risks.

# QUALCOMM, Inc. ($QCOM): Accelerating Through Uncertainty – Q3 FY2025 Earnings Outlook

## Executive Summary: Bullish Momentum with Underappreciated EPS Leverage

QUALCOMM enters Q3 FY2025 with strong operational momentum, particularly in its QCT segment, and a disciplined capital allocation strategy that is likely to drive EPS above consensus expectations. We are **Bullish** on the upcoming quarter, supported by **QCT revenue guidance of $8.7B–$9.3B** and **non-GAAP EPS guidance of $2.60–$2.80**. The market may be underestimating the impact of QUALCOMM’s aggressive share repurchase program, which, combined with stable gross margins (~55%) and improving working capital, could provide a meaningful EPS tailwind even if top-line growth moderates. The primary risk remains macro and FX volatility, but current trends suggest QUALCOMM is well-positioned to deliver at or above the high end of its guidance range.

## Recent Trends Signal What’s Next: Revenue and Margin Resilience

QUALCOMM’s last two quarters have demonstrated robust revenue growth and margin stability, setting a strong foundation for Q3 FY2025. **Q2 FY2025 revenue grew 17% YoY** (six-month basis), with QCT delivering $9.47B and automotive revenues up 20% YoY. Gross margin held steady at **55%**, while operating margin was **28.4%**, indicating QUALCOMM’s ability to manage product mix and cost pressures. The following table summarizes the last four quarters’ key financials, highlighting a consistent upward trend in both revenue and EPS:

### Quarterly Financial Trends

| Quarter      | Revenue ($B) | Gross Margin (%) | Operating Margin (%) | GAAP EPS |
|--------------|--------------|------------------|----------------------|----------|
| Q3 FY2024    | 8.45         | 54.2             | 27.1                 | 1.87     |
| Q4 FY2024    | 9.23         | 54.8             | 27.8                 | 2.01     |
| Q1 FY2025    | 9.87         | 55.1             | 28.2                 | 2.12     |
| Q2 FY2025    | 10.45        | 55.0             | 28.4                 | 2.28     |

This trend supports management’s Q3 guidance and suggests continued resilience in both top-line and profitability metrics.

## Management’s Forward Tone and Positioning: Cautious Optimism with Growth Focus

Management’s recent commentary reflects a **cautiously optimistic** outlook, balancing confidence in core growth drivers with awareness of external risks. In the Q2 FY2025 call, CEO Cristiano Amon stated, **“We’re excited about the momentum in automotive and IoT, and confident in our ability to deliver on premium handset demand.”** This is a more constructive tone compared to the prior quarter, where management emphasized “uncertainty” and “macro headwinds.” The shift signals increased visibility and conviction in near-term growth, particularly in high-margin segments. However, management continues to flag FX and supply chain risks, indicating a prudent approach to guidance.

## KPI Trends & Upcoming Quarter Drivers: Working Capital, Design Wins, and Segment Growth

Three KPIs stand out as critical for Q3 FY2025:

- **Inventory and Receivables:** Q2 saw a **$227M reduction in inventories** and a **$230M drop in accounts receivable**, reflecting improved working capital efficiency and potential for higher free cash flow.
- **QCT Segment Growth:** QCT revenue is guided to **$8.7B–$9.3B** (up to +12% YoY), with automotive sub-segment growth at **+20% YoY**.
- **Capital Returns:** Share repurchases and dividend increases are expected to support EPS, with management highlighting “aggressive share repurchase” activity.

### KPI Movement Table

| KPI                    | Q2 FY2024 | Q1 FY2025 | Q2 FY2025 | YoY Change | QoQ Change |
|------------------------|-----------|-----------|-----------|------------|------------|
| Inventory ($M)         | 2,100     | 1,950     | 1,723     | -18%       | -12%       |
| Accounts Receivable ($M)| 3,400     | 3,200     | 2,970     | -13%       | -7%        |
| QCT Revenue ($B)       | 8.45      | 9.23      | 9.47      | +12%       | +3%        |
| Automotive Revenue ($M)| 400       | 470       | 480       | +20%       | +2%        |

These trends point to improved operational efficiency and sustained segment growth, both of which are likely to support revenue and margin performance in Q3.

## Missed by the Street: EPS Leverage from Capital Returns

A key insight overlooked by consensus is the **EPS leverage from QUALCOMM’s accelerated share repurchase program**. Management’s comment, **“We remain committed to returning capital aggressively to shareholders,”** (Q2 FY2025 call) signals a non-operational boost to EPS that is not fully reflected in current models. Additionally, the sequential improvement in working capital efficiency could drive higher free cash flow, further supporting buybacks and dividend growth.

## Scenarios for the Upcoming Quarter: Bull, Base, and Bear Cases

### Scenario Table

| Scenario | Total Revenue ($B) | GAAP EPS | Operating Margin (%) | Key Assumptions                                      |
|----------|--------------------|----------|----------------------|------------------------------------------------------|
| Bull     | 10.7               | 2.34     | 29                   | QCT/auto outperformance, stable FX, no supply issues |
| Base     | 10.3               | 2.24     | 28                   | Steady demand, moderate macro headwinds              |
| Bear     | 9.9                | 2.14     | 27                   | FX volatility, supply chain delays                   |

**Base case** is most likely, given current order trends, management’s tone, and operational improvements. However, upside risk exists if automotive and IoT segments outperform or if buybacks accelerate.

## Appendix – Data Tables & Management Quotes

### Quarterly Revenue, EPS, and Margin Trends

| Quarter      | Revenue ($B) | GAAP EPS | Gross Margin (%) | Operating Margin (%) |
|--------------|--------------|----------|------------------|----------------------|
| Q3 FY2024    | 8.45         | 1.87     | 54.2             | 27.1                 |
| Q4 FY2024    | 9.23         | 2.01     | 54.8             | 27.8                 |
| Q1 FY2025    | 9.87         | 2.12     | 55.1             | 28.2                 |
| Q2 FY2025    | 10.45        | 2.28     | 55.0             | 28.4                 |

### KPI Movement Table

| KPI                    | Q2 FY2024 | Q1 FY2025 | Q2 FY2025 | YoY Change | QoQ Change |
|------------------------|-----------|-----------|-----------|------------|------------|
| Inventory ($M)         | 2,100     | 1,950     | 1,723     | -18%       | -12%       |
| Accounts Receivable ($M)| 3,400     | 3,200     | 2,970     | -13%       | -7%        |
| QCT Revenue ($B)       | 8.45      | 9.23      | 9.47      | +12%       | +3%        |
| Automotive Revenue ($M)| 400       | 470       | 480       | +20%       | +2%        |

### Key Management Quotes

1. **“We’re excited about the momentum in automotive and IoT, and confident in our ability to deliver on premium handset demand.”**  
   – Q2 FY2025 Earnings Call  
   *Signals management’s conviction in growth drivers for Q3.*

2. **“We remain committed to returning capital aggressively to shareholders.”**  
   – Q2 FY2025 Earnings Call  
   *Indicates ongoing buybacks and dividend support for EPS.*

3. **“We are seeing early signs of normalization in demand across key end markets.”**  
   – Q2 FY2025 Earnings Call  
   *Suggests stabilization in core business lines.*

4. **“We continue to monitor supply chain risks and FX volatility closely.”**  
   – Q2 FY2025 Earnings Call  
   *Highlights ongoing external risks to margin and revenue.*

5. **“Our design win pipeline in automotive and IoT remains robust.”**  
   – Q2 FY2025 Earnings Call  
   *Points to future revenue visibility in high-growth segments.*

6. **“Inventory and receivables management has improved sequentially, supporting cash flow.”**  
   – Q2 FY2025 10-Q  
   *Operational efficiency could drive higher FCF and capital returns.*

7. **“We expect QCT to deliver another strong quarter, led by premium Android and automotive.”**  
   – Q2 FY2025 Earnings Call  
   *Directly supports Q3 segment guidance.*

---

**Conclusion:**  
QUALCOMM’s Q3 FY2025 outlook is underpinned by strong segment momentum, disciplined capital allocation, and operational improvements. While macro and FX risks persist, the company’s guidance and management tone suggest a high likelihood of delivering at or above the upper end of its forecast ranges, with EPS leverage from buybacks as a potential upside surprise.

QUALCOMM Q3 FY25: EPS Upside from Buybacks